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Tag Archives: Minimum Wage

Recently, the stock market suffered two of the largest one day drops in history. Even if you are not heavily invested in the market, it does affect you. Before we dive in, we need to give a short explanation of how the stock market works. NOTE: There are numerous factors to consider too lengthy to list here. Therefore, this is brief overview of the market in very general terms…

Companies offer stocks (individual parts of the company) that can be bought by investors. The money from stock purchases is used to run companies. Investors buy stocks at a certain price that is determined by numerous factors. As these factors change, so does the value (price) of each stock. Investors make money by buying stocks as a lower price, and selling them when they are at a higher price.

To prevent massive selloffs as stock values increase, dividends (money the company pays out to investors as its stock’s value increases) and stock splits are offered to shareholders. So shareholders want companies to make profits so stocks values rise, dividends rise, and they make more money on their investments. Any factor that prohibits or slows this “process” is hostile to a shareholder and could result in a selloff of stocks. This is how the stock market decreases.

“The historic Dow Jones drop that occurred on Monday was in part a reaction to Friday’s jobs report, which showed stronger wage growth than at any point since 2009.”

What does this mean?

The stock market reacts negatively to higher wages earned by employees. The latest monthly jobs report included data that showed a wage increase. While this is great and welcomed news for employees, it is not great news for the companies they work for. The obvious reason is the companies are paying out more to employees, so their costs of doing business go up. If not leveraged correctly, a company loses money when it increases wages for its employees. So how does this affect the stock market? Read the next key point…

“As companies sink more money into wages, there’s less left for shareholders.”

What does this mean?

Shareholders, otherwise known as people who have invested money in a company, expect to make money off their investment. They don’t want to a little money. They want to make a lot of money! This means their interest (making money) is in direct conflict with your interest (higher wages as an employee). It is crystal clear: as companies sink more money into wages, there’s less (money to make off their investments) left for shareholders. Who wins this battle? Shareholders, who are necessary because of the money they invest in a company, or wage earners, who are necessary because of the work they do for a company.

“Wage growth also contributes to concerns about inflation — another drag on corporate profits and the expectation thereof, which is what motivates the stock market.”

What does this mean?

Wage growth contributes to concerns about inflation (a rise in the overall cost of living due to a rise in the cost of goods and services). Higher wages mean a company has to recover losses due to paying higher wages. An easy way to do this is to raise prices of their goods and services. This leads to inflation (notice the expression “another drag on corporate profits”). If higher prices result in fewer sales, corporate profits take a hit here, in addition to the hit taken from paying employees higher wages. These two losses mean less money for shareholders, which will lower the stock market if they decide to sell their stocks.

Now that we have a better understanding of the stock market, one must think about a few things and ask a couple questions:

If you do not buy stocks, or have the “disposable income” to do so, why not?

Who does the company you work for value more: you as their employee or their shareholders?

Who is not in favor of wages rising for employees, because it could negatively affect the stock market?

Who benefits most when the stock market rises?

Who tries to get out of the stock market when it starts to decline?

Who is more likely to own large amounts of stock: a poor/middle class person or an upper class/ wealthy person?

Why are economics, finance, and the stock market not taught more in public grade and high schools where public education is free?

Please understand this issue is all about color. The color I am referring to is not white or black. The color is green (money). When we realize green controls everything AND it “trumps” all other colors, we will understand this has nothing to do with most issues that divide us. It has nothing to do with race, greed, skin color, gender, religious affiliation, sexual orientation, or political affiliation. The stock market only deals with money. For those heavily invested in the market, anything that causes values to increase is good. On the flip side, anything that causes value to go down is not good. Unfortunately, this includes higher wages for working people.

Throughout the course of my life, I have learned that there are still a few disqualifiers that make it difficult for many people to live the lives they want. A quick history lesson can set up the concept of disqualifiers. In the past (not today of course), disqualifiers were gender, race, religion, sexual orientation, and economic status, just to name a few. If you were on the wrong side of one or more of these things, you could have been disqualified from something our society had to offer. That was then, not now!

At this point, one must ask why were disqualifiers set up and used in the first place. Didn’t the Declaration of Independence and US Constitution clearly spell out the rights of all American citizens? The obvious conclusion is there has always been a reason to disqualify people. There has always been a reason to separate people. There has always been a reason to exclude people. There has always been a reason to disqualify people. Eventually the legality of many of these disqualifiers came into question. In time, most of these disqualifiers became illegal so people could not be so easily excluded.

Now you would think that with all of the barriers that disqualified so many taken away, more people would be able to make progress toward their dreams and goals. Yet there is a growing segment of people in our society who are just as far away from their goals as ever. Why is that? I believe it is because disqualifiers still exist today. These disqualifiers are more subtle, and much harder to try and overturn in our courts of law. One of these disqualifiers that need to be revealed is credit (personal finance).

By adulthood, most people have discovered that credit “makes the world go round”. If that discovery happens after mistakes with credit, people quickly learn that our credit is one of the remaining great disqualifiers. Simply put, once you make mistakes with your credit, it is very hard to erase the effects of those mistakes. If you do not understand the nature of the problem and continue to make credit mistakes, you can easily dig a hole that will take years to overcome. Unfortunately, many never overcome their credit issues. For them, credit becomes a lifelong disqualifier.

Think about it, if you have poor credit you are disqualified from a lot of things. You probably pay higher for your insurance, because poor credit HAS TO MEAN you are a risky person. If you have credit cards, you are being charged a higher interest rate, because poor credit HAS TO MEAN you are irresponsible. Did you buy a car or house? If so, you are paying more than someone with good credit, because poor credit HAS TO MEAN you need to pay more just to prove your worthy of receiving the loan you got. With more jobs requiring credit checks, there is a possibility that you missed out on one, because poor credit HAS TO MEAN you would not make a good employee.

These are just a few examples of how poor credit can disqualify you for low rates, and in some cases, prevent you from consideration at all. The sad part about it is so many people are blind to this issue until it is too late. Most of the time, the people who are oblivious to how credit works are the SAME people who were disqualified for so many years in our society: the poor, minorities, women, and immigrants. Let that sink in for a second. Now think about this: many of the reasons why these people were previously disqualified have been ruled illegal, thanks to our undeniable rights and the court systems that uphold them. Now, these same people are being disqualified for things that ARE LEGAL and hard to fight against in our courts of law. Credit is one of these remaining disqualifiers.

The question I have is why is this allowed to happen? I believe that is the real issue: people are not taught about credit and personal finance. Without guidance, too many people are doomed to make mistakes with their credit. which will disqualify them at different stages of their lives. It drives me crazy because there is a simple fix to the problem. Why do we allow a lack of knowledge to disqualify people? Why don’t we teach our ALL OF OUR CHILDREN about credit during their formal education?

I know there are hundreds of schools that do teach about credit, or some level of financial literacy. Maybe they teach about balancing a checkbook. Maybe they teach about interest rates. Maybe they teach about personal finance. However, I know for a fact, that hundreds of schools DO NOT teach our students about these things. To me, personal finance and credit management should be mandatory classes in both grade school and high school. I went to decent schools, but I only received minimal (if any) information about personal finance and credit.

I am not one to neither throw out conspiracy theories nor pull the victim card out of my pocket, but this issue makes me wonder. Millions of people struggle with their credit, and poor credit disqualifies so many of them. Everyone is entitled to free public education, yet credit and personal finance is not a part of that education in many schools. It seems like a no-brainer: teach students how to use credit properly, and less adult will make mistakes with their credit, which will disqualify them from things our great society has to offer. Yet this is not being done during the formal educational process!

Here is my conspiracy theory: the system of finance and credit HAS TO HAVE a certain amount of people who mismanage their credit. If everyone knows how to manage their credit AND more people did it right, it would cause our financial systems to collapse. I know it sounds crazy, but to me it also sounds crazy to try to disqualify people because of gender, race, religion, sexual orientation, and ECONOMIC STATUS. Wait a minute, poor credit leads to poor economic status for millions of people!

So I want to know, why is credit one of the remaining great disqualifiers?

The debate over increasing the minimum wage is being argued by government officials, businesses like Walmart and McDonald’s, and workers all across America. I believe that the minimum wage should be higher than the current poverty level so that workers can earn a living wage. Let me simplify the minimum wage debate with a very basic example to get started. According to the US Department of Health and Human Services, the poverty guideline in 2013 for a family of four was $23,550 (not including Alaska and Hawaii). In order for one parent in this household to make enough money to be above this poverty guideline, one full-time job would have to pay $11.78 dollars an hour (assuming a 40-hour work week for 50 weeks out of the year or $23,560). This simple calculation does not even include taxes and healthcare, so the numbers actually need to be reworked just to find the “correct” minimum wage.

My point here is not to get tangled up in figuring out what the correct amount the minimum wage should be. It is an exercise in futility because so many families are falling short of the American Dream: a married couple with two kids, a house with a white picket fence, one pet, and a car parked in the driveway. The current minimum wage would not support this family today, unless they live off of basic necessities and grow their own food for the family and the dog! We know the costs of heating the home, putting gas in the car, and feeding the family put a strain on many households struggling to make ends meet. So I think most people would agree that the minimum wage is too low, but the question remains: how much is should the minimum wage be to meet our basic needs so that American families can survive?

However, this is not the question that I want to address because I believe there is something missing in the minimum wage debate. The question is: how do we PREVENT so many people from ending up in minimum wage jobs so that they can at least cover their basic living expenses? My answer to this question is to offer free financial education for all people, especially children and young adults. In my opinion, every school in America should be teaching students about the minimum wage, the poverty level, taxation, inflation, and other computations of real-world financial scenarios that affect millions of American today. I don’t mean to get on my soapbox here, but why do most kids need mathematics beyond algebra anyway? Instead, they need to learn about money and finance to have a basic understanding about how their choices can lead to either financial rewards or financial hardships.

The financial hardships so many Americans currently face are based upon their inability to make a living wage, so the debate to raise the minimum wage continues to gain momentum. However, in my opinion raising the minimum wage would be like putting a band aid on an open wound. It definitely needs to be done to temporarily cover the injury, but the real “fix” is prevention before the injury occurs. In other words, providing a minimum wage increase would temporarily “fix” the problem, but we need to help people get out of poverty and avoid getting caught in a minimum wage trap. Even with financial education, there is no guarantee that people will make better choices, but hopefully it will increase our awareness and improve our decision-making abilities.

Improving financial education well before the struggle begins is only one of the cures for the minimum wage problem going forward. Once this is accomplished, it becomes an issue of personal choice of how to manage finances. With education, we have the power to avoid being caught in the trap of needing a minimum wage increase just to survive. I know this debate has a lot more layers, but this simple treatment of the issue should serve only as a starting point and a different way to examine the minimum wage debate. I am an advocate of additional help and resources and education to reduce the problem. This is not an attempt to disparage or criticize anyone fighting for a minimum wage increase to survive.